Talk of competition between London, Paris and Frankfurt misses the point.

It is the relative competitiveness of Europe and rival centres in Asia and America that is the real issue.

And alongside a more competitive financial sector, we also need a structural reform programme to make our whole economies more competitive.

Opening up product markets, liberalising labour markets, promoting enterprise and reforming welfare states - those must be our priorities.

We need an ambitious structural reform plan to kick-start growth and boost employment, including in new growth sectors such as green goods and the digital economy.

But of course the biggest challenge this year is perhaps a domestic one.

We need to get our own houses in order.

The rest of the world does not owe Europe a living.

If we are to calm the fears around the solvency of sovereigns across our continent, action at a European level needs to be matched by difficult domestic decisions.

The sense of crisis may have eased since the start of last year, but wide spreads and high market interest rates still stalk several European economies.

Countries need plans to reduce deficits, tailored for their circumstances, based on credible institutions that can underpin market confidence, especially in countries with large financial sectors.

Here the British experience offers a useful insight.

When we came into Government in the UK, we were predicted to have the largest budget deficit in the G20.

Until Ireland overtook us, we were going to have the largest budget deficit in the European Union.

The affirmation of the UK’s triple-A credit rating and the fall last year in our market interest rates, at a time when other countries’ are going up, demonstrates that it is possible to earn credibility with a convincing deficit reduction plan.

This week saw the plan start to take effect with the tough but necessary step of increasing Value Added Tax to 20%.

And deficit reduction can also go hand-in-hand with greater structural reform across our economies.

We are investing in our priorities - early years education, transport infrastructure and, almost alone in the world, putting resources into meeting our 0.7% target for international aid.

I would like to finish on an optimistic note.

Because despite these challenges, I remain profoundly optimistic about the future.

The opportunities offered by the modern world economy are immense.

Because every day around the world, in places like China, India, Brazil, Indonesia and Vietnam, millions of people leave the grinding poverty that has trapped their families for generations and become connected to the global economy.

They leave behind subsistence farming and go to work in factories.

And so nations of manufacturers are taking their first step in their journey to prosperity.

And as they become richer, they will become nations of consumers, hundreds of millions of people who will want to buy the things that British and French companies can sell them.

Our pharmaceutical firms will provide them with modern medicines and branded goods.

British and French companies will sell them insurance, banking, accountancy.

Over time they will become consumers of tourism and visit Paris and London.

And they will hopefully fly here on Airbus planes with Rolls Royce engines.

The whole world can be our market place.

And that is why we should be optimistic about this world we have helped create.

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